Snap-on Inc (SNA) Q2 2026 Earnings Call Transcript

Good day, and welcome to the Snap-on Incorporated 2026 Second Quarter Results Conference Call. Please note that this event is being recorded. I would now like to turn the call over to Sara Verbsky, Vice President, Investor Relations. Please go ahead.

Thank you, Cole, and good morning, everyone. We appreciate you joining us today as we review Snap-on's second quarter results, which are detailed in our press release issued earlier this morning. We have on the call Nick Pinchuk, Snap-on's Chief Executive Officer; and Aldo Pagliari, Snap-on's Chief Financial Officer. Nick will kick off our call this morning with his perspective on our performance. Aldo will then provide a more detailed review of the financial results. After Nick provides some closing thoughts, we'll take your questions. As usual, we provided slides to supplement our discussion. These slides can be accessed under the Downloads tab in the webcast viewer as well as on our website, snapon.com, under the Investors section. The slides will be archived on our website along with the transcript of today's call. Any statements made during this call relative to management's expectations, estimates or beliefs or that otherwise discuss management's or the company's outlook, plans or projections are forward-looking statements, and actual results may differ materially from those made in such statements. Additional information and the factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SEC filings. Finally, this presentation includes non-GAAP measures of financial performance, which are not meant to be considered in isolation or as a substitute for their GAAP counterparts. Additional information regarding these measures is included in our earnings release issued today, which can be found on our website. With that said, I'd now like to turn the call over to Nick Pinchuk. Nick?

Thanks, Sara. Good morning, everyone. This was some quarter, a testimony that Snap-on executes even in a blizzard, and that our operations represent a clear and credible beacon, showing a continuing path for a positive trajectory as we go forward. The quarter was marked with ongoing momentum and more green shoots, progress against the whirlwind. This is a turbulent time. I don't know that I've seen more elements of uncertainty packed into a single quarter: Ukraine, inflation, fluctuating tariffs, restructured supply chains and now the impasse with Iran. It's really something. But Snap-on shook it all off, punching right through the difficulties of the fog with emphasis, fortified by the inherent and enduring positives of our markets: the rising complexity of vehicles, the aging car park, the growing demand for precision and customization in critical industries and the rise of technology software that makes the special and the proprietary more powerful. Put all of that together with our decisive advantages in product and brand and people, amplified by our Snap-on Value Creation Processes driving improvements, it makes for a powerful combination that creates an encouraging quarter and a very promising future. Now I'll take you through all that hitting some of the highlights and giving you my perspective on what it all means, and Aldo will give you a detailed review of the financials. So let's start with the results. I believe they testified to all that I just said. Second quarter as reported sales were $1,235.1 million, up $55.7 million or 4.7% including $11.5 million from the recent additions of Hi-Force and Diesel Laptops, $8.7 million of favorable foreign currency translation and an organic gain of 3%. The opco operating income, or OI, was $268 million. The opco operating margin for the quarter was 21.8% compared to 22% last year, down slightly, but still strong, especially in this environment. The gross margin was an attention-getting 51.4%, 90 basis points higher than last year. So the overall story of the period was an encouraging performance, overcoming cost pressures and funding investments for the future. For FinCo, the operating income was $67.5 million versus $68.7 million in 2025. Combined with our opco operating income, this resulted in a consolidated operating margin of 25.2%. EPS was $4.96, up $0.24 or 5.1%. Another positive. So those are the numbers. Now let's turn to the market. Vehicle repair is still a great place to be. Cars and trucks are essential parts of our lives, but keeping them on the road is more and more of a challenge. The park is getting older every day. The models are getting more complex with each new launch. This is the golden age of vehicle repair and the numbers tell the story. Spending on repair, technician hours worked, and mechanic wages are all up. So the garages are active, and the techs remain cash rich. But in this environment, they still remain confidence poor. The uncertainty hasn't gone away. A single scan of the morning news will tell you that. So our customers, the technicians, remain reluctant to take on longer-term obligations on big-ticket purchases. Tool storage volume and the associated originations are still down. But mechanics need to meet the rising complexity, so our pivot to quicker payback items is working. Overall volumes are up. The technicians really are a great segment, resilient, and period by period that's what's playing out in the Tools Group. Recently I had the opportunity to visit franchisees in the field, speak with shop owners and technicians, and I came away more convinced than ever that this is a great place to be. The franchisees were energized about their current prospects and optimistic about their future. Independent shop owners can only talk about how to get more technicians; they wanted as many as they could find. A tech told me they were slammed, saying that repairs are getting way more difficult, especially troubleshooting, accessing and repairing newer systems. Better access in tight quarters to speed their work was high on their list, and we're putting them on target. One tech said, "I have my new NanoAxcess Power Tool. The other day, it helped me shave 90 minutes off a repair. We need more tools like that. Snap-on speeds the work and shows everyone I'm a serious professional." This is music to my ears because this is who we are and what we do. We go to work where the work is happening. We observe the techs, identify the toughest and most complex tasks, and develop customized solutions that make the work easier, faster and more productive. The techs line up to gain that advantage. One reason the pivots work. The other side of auto repair is where the Repair Systems & Information Group, or RS&I, operates. It's where we're expanding our presence with repair shop owners and managers, increasing and enabling our broad array of products to help garages meet the broader challenges of today's vehicles. The acquisition of Diesel Laptops, giving our team more to sell in the heavy-duty arena, is a great example. We like RS&I's potential going forward. The repair shop footprint is changing and upgrading, both at dealerships and independent shops, and RS&I is making the most of that trend with proprietary data-driven solutions that are the engine behind our intelligent diagnostic software and our Mitchell 1 software offerings. Right now, independent shops are continuing to invest in adopting products that expand their capabilities. For example, this quarter our new A/C recycling machine aligned with the refrigerants used in modern vehicles and offers autonomous features that boost shop productivity. The new design helps garages drive more repair orders and it was quite popular with independent shops. For our OEM dealers, there's hesitancy for capital expenditures. Owners and managers know they need upgrades to match new models, but many are keeping their powder dry, waiting to take the lead from manufacturers, and automakers have slowed their program launches. So the dealer side of the business is in a low spot. Having said that, RS&I understands the market, and it has an unrivaled product portfolio uniquely positioned to take full advantage as the segment evolves. Now let's speak to the world outside the garage. In critical industries, this is where Commercial & Industrial, or C&I, operates. This business has the largest international presence, serving the critical and the essential, where the penalty for failure is high. That world is advancing, adopting new technologies and creating systems that are more and more sophisticated. It's an environment where the appetite for precision and customization is growing every day and C&I is right on that trend. Sales were up across a number of sectors and geographies at C&I. Critical industries are booming and our custom-built kits aimed at specific challenges are in strong demand. This is a time for our specialty torque division because the rising number of automated systems requires tighter tolerances. Our expanding torque operation can fill that bill from large hydraulic and tensioning systems to lower-force applications where speed and control are challenging, like in our Mountz acquisition. Snap-on increasingly has the product lines to cover the waterfront and meet the growing trend for precision. For the international landscape outside the garage, the Asia Pacific and European operations rebounded nicely and stabilized against the backdrop of a still ever-changing supply chain. In that regard, Snap-on is advantaged by manufacturing in the markets where we sell and by our 36 factories around the world, giving us considerable flexibility. Those strengths were clearly in play this quarter and the C&I results are a dramatic confirmation. Overall, in both vehicle repair and critical industries, the quarter demonstrates the strong resilience of our markets and our significant ability to take advantage. The period also shows the power of Snap-on Value Creation Processes: safety, quality, customer connection, innovation and rapid continuous improvement, or RCI. It all came together, creating popular new products and continuing improvements. Gross margins are up 90 basis points. That's the macro overview. Now let's move to the segments. Starting with C&I. Sales were $395.8 million, an increase of $48 million or 13.8%. That includes $6.8 million from our Hi-Force acquisition, $2.5 million of favorable foreign currency and an organic gain of 11%. Hearing that, there's only one reasonable thing to say — boomshakalaka. There are gains and improvements across the business. Double-digit increases in Asia Pacific, in the European hand tools business, in specialty torque and power tools. The demand for custom kits, precision torque and innovative power tools is strong. The Industrial business was up mid-single digits, but that includes continued weakness in the military sector, which somewhat attenuates a demonstration of considerable strength in heavy-duty natural resources and in U.S. and international aviation. From an earnings perspective, C&I operating income was $66.5 million, improved $19.6 million or 41.8%. The operating margin was a new record, 16.8%, 330 basis points above last year. The gross margin, amid material cost inflation, was 42.6% — up 260 basis points over last year. We said Snap-on could extend out of the garage, and it's doing just that profitably. Innovative new products from Murphy, North Carolina were a major driver. One example is our all-new CTR829 — a 1/4-inch drive, 14.4-volt ratchet with an extra-long wrench stretching out 11 inches to reach isolated spaces. It's the little brother of the previously launched 3/8-inch model, but it produces 40 foot-pounds of torque and operates at 400 RPMs from a compact frame that houses a bright LED ring to illuminate the workspace. Techs can reach further and engage bolts with ease. We also released the new 3/8-inch digital torque wrench, the ATECH 135. Precision is important. The ATECH 135 is the latest entry in our ATECH product line. It offers easy navigation, a durable housing, compact head design and incredible precision. Designed in our City of Industry facility in California, it has a new color display that provides better viewing from any angle and makes a clear image even in direct sunlight. The unit boasts 135 foot-pounds of torque. The 135 makes torque tasks much easier. Precision torque is on the rise, and Snap-on is leading the way. That's C&I: significant growth across the global footprint. Sales up 13.8%, 11% organically. Second straight quarter of big increases in sales, operating income of 16.8%, a 330 basis point improvement — a C&I all-time record. The Snap-on brand is extending out of the garage to serve the critical industries and C&I is the rocket ship making it so. Now let's turn to the Tools Group. Group sales were $508.8 million, up organically 3%. The green shoots continue. Increases in both U.S. and international operations, pivoting to quicker payback items like power tools and torque wrenches. Operating income was $115.1 million compared to $116.7 million last year. The operating margin was a respectable 22.6%, down slightly. Volumes were strong but were driven by products made by other Snap-on divisions, like the power tools and torque products where margins are shared across operations, making Tools Group margins thinner. The group's strongest sales this quarter were part of the pivot to match customers' changing preferences. When I was talking to the techs, they were effusive: "Boy, we love your product that attacks some of the special and more difficult tasks we have." For instance, removing lug nuts can evolve into a thorny procedure. Several OEMs put chrome covers on the wheel nuts for appearance. These caps often swell and deform from exposure and harsh winters. When that happens, traditional sockets won't fit and valuable garage time is wasted cutting that material away. We developed a 7-piece drive socket set with in-between metric sizes from 16.5 millimeters to 22.5 millimeters to fit the task and provide solid engagement, enabling rapid improvement and a quick repair. It was a manufacturing challenge accommodated by the flexibility of our Milwaukee plant, and it became one of our $1 million hit products. We also recently introduced a 7-piece Swivel TORX Impact Flex Socket set, ideal for difficult jobs accessing high-strength TORX fasteners in tight areas, common in European high-performance vehicles: Volkswagen and Audi steering columns, BMW caliper brackets, Mercedes front brake calipers and Jaguar driveshafts. The design has a laser-welded swivel joint offering up to 30 degrees of flex, enabling a power tool to operate effectively in confined spaces without time-consuming disassembly. The set was just introduced and techs are big fans. That's the Tools Group: growing against the winds of uncertainty, pivoting to faster payback items, observing work and developing solutions that solve the complex. Now let's turn to RS&I. Sales in the quarter were $480.3 million, up 2.5%, including $4.7 million from the Diesel Laptops acquisition and $3.8 million in favorable foreign currency translation. Organic sales were up slightly. Momentum in our diagnostic and undercar equipment for independent garages was attenuated by lower volumes in the OEM dealership segment. Operating earnings in the quarter were $115.1 million compared to $119.8 million last year. The group's operating income margin was 24% versus 25.6% last year — down, but still strong. That decrease represents the effect of higher sales in lower-margin equipment products and ongoing investments in our proprietary database, advancing with our large language models, an effort that we know will pay dividends going forward. Independent shops were the bright spot, driven in part by the recent launch of our APOLLO handheld diagnostic unit. It's an entry point for techs wanting intelligent diagnostics at a moderate cost, but the phrase "entry level" doesn't do it justice. APOLLO has the full power of our proprietary information, expansive manufacturer and model coverage, Fast-Track Intelligent Diagnostics for guided workflow and our SureTrack database powered by 660 billion vehicle events and 3.4 billion repair records. APOLLO is smart, easy and faster with improved display visibility, extended battery life, wireless vehicle connection so techs can roam freely in the bay, and increased storage for faster performance. The new APOLLO is a winning combination and sales off the van were strong with robust momentum after launch. So that's RS&I: powerful hardware and software, differentiated by proprietary data with more speed and more accuracy than ever before, wielding new products to conquer the complex repairs of today's cars. So that's Snap-on's second quarter. Overall sales, $1,235.1 million, an all-time record for the second quarter. Organic sales up 3%. Gross margin, 51.4%, up 90 basis points. C&I Group organic sales up 11%, gross margin up about 260 basis points, and operating margin up 320 basis points — gangbusters. The Tools Group's organic sales up 3% and the pivot is working. RS&I organic sales up slightly and the as-reported number set a new record for overall sales in the second quarter. Profits are down but still strong. The overall corporation EPS of $4.96, up $0.24 versus last year. Snap-on is rolling down our runways for growth, enhancing the van channel, pivoting effectively, expanding with repair shop owners and managers, strengthening our proprietary advantages and extending to critical industries, taking Snap-on out of the garage with emphasis and profitability. It was an encouraging quarter. Now I'll turn the call over to Aldo. Aldo?

Thanks, Nick. Our consolidated operating results for the second quarter are summarized on Slide 6. Net sales of $1,235.1 million in the quarter represented an increase of 4.7% from 2025 levels, reflecting a 3% organic gain, $11.5 million of sales from the acquisitions of Hi-Force Hydraulic Tools and Diesel Laptops that occurred during that period, and $8.7 million of favorable foreign currency translation. Sales in our Commercial & Industrial sector, or the C&I Group, were up double digits versus last year, with progress made across North America, Asia and Europe. In our automotive repair market, sales gains were achieved through our franchise van channel in the United States as well as internationally. Consolidated gross margin of 51.4% compared to 50.5% in the second quarter last year. The improvement of 90 basis points primarily reflected the benefit of increased volume and savings from the company's RCI initiatives. Operating expenses as a percentage of net sales of 29.6% rose from 28.5% in 2025, primarily due to increased personnel and other costs, as we continue to invest in support of our brand and our business opportunities. Operating earnings before financial services of $268.9 million in the quarter compared to $259.1 million last year. As a percentage of net sales, operating margin before financial services of 21.8% compared to 22% reported in 2025. Financial services revenue of $99.7 million in the second quarter compared to $101.7 million last year, while operating earnings of $67.5 million compared to $68.2 million in 2025. Consolidated operating earnings were $336.4 million compared to $327.3 million last year. As a percentage of revenues, the operating earnings margin of 25.2% compared to 25.5% in 2025. Our second quarter effective income tax rate was 21.9% in 2026 and 22.5% last year. Net earnings of $260.6 million or $4.96 per diluted share compared to $250.3 million or $4.72 per diluted share in 2025, reflecting a 5.1% increase in earnings per share. Now let's turn to our segment results for the quarter. Starting with the C&I Group on Slide 7. Sales of $395.8 million rose $48 million compared to 2025 levels, reflecting an 11% organic gain, $6.8 million of acquisition-related sales and $2.5 million of favorable foreign currency translation. The organic volume improvement includes advancements in our Asia Pacific and European-based hand tools businesses, which have better tailored their cross-border supply chain activities in response to the current trade environment. The group also benefited from double-digit gains in our specialty torque and power tools operations. Sales to customers in critical industries rose mid-single digits in the period, led by robust activity in international and U.S. aviation, and including gains in heavy-duty fleets and technical education. Shipments serving military applications remain attenuated both in the quarter and year-to-date. Gross margin improved 260 basis points to 42.6% in the quarter from 40% last year, mostly due to the increased sales and savings from the segment's RCI initiatives. Operating expenses as a percentage of sales of 25.8% in the quarter improved 70 basis points from last year, primarily reflecting the higher sales volumes. Operating earnings for the C&I Group were $66.5 million compared to $46.9 million in 2025, and the operating margin of 16.8% improved 330 basis points from last year. Turning now to Slide 8. Sales in the Snap-on Tools Group of $508.8 million compared to $491 million last year, reflecting a 3% organic sales gain and $2.9 million of favorable foreign currency translation. The organic increase was due to low-single-digit gains, both in the United States and in the segment's international operations. Activity in the quarter included higher sales of featured new items, including those in the power tools, air conditioning service and diagnostics product lines. As a reminder, the Tools Group serves as a distributor for these products, which are made by our C&I and RS&I Groups. Gross margin of 48% in the quarter compared to 48.3% last year. The 30 basis point decline primarily reflected a year-over-year shift in product mix, partially offset by savings from the segment's RCI initiatives. Operating expenses as a percentage of sales of 25.4% compared to 24.5% in 2025. The increase was due to higher personnel, freight and other costs. Operating earnings for the Snap-on Tools Group were $115.1 million compared to $116.7 million in 2025. The operating margin of 22.6% compared to 23.8% last year. Turning to the RS&I Group shown on Slide 9. Sales of $480.3 million compared to $468.6 million a year ago, reflecting a $3.2 million organic gain, $4.7 million of acquisition-related sales and $3.8 million of favorable foreign currency translation. On an organic basis, low-single-digit increases in undercar equipment and in sales of diagnostics and repair information products to independent repair shop owners and managers were mostly offset by decreased activity with OEM dealerships. Gross margin for the RS&I Group of 46.3% decreased 50 basis points from last year, primarily reflecting higher sales of lower gross margin products. Operating expenses as a percentage of sales of 22.3% compared to 21.2% in 2025. The increase was due to higher personnel and other costs, expanded technology investments as well as 20 basis points from the recently completed acquisition of Diesel Laptops. Operating earnings were $115.1 million compared to $119.8 million last year. The operating margin of 24% compared to 25.6% reported in 2025. Now turning to Slide 10. Revenue from financial services of $99.7 million decreased $2 million from last year, primarily due to lower interest income resulting from a year-over-year decrease in the size of the average finance receivable portfolio in the period. Financial services expenses of $32.2 million decreased from $33.5 million in 2025, mostly due to $1 million of lower provisions for credit losses. As a result, financial services operating earnings were $67.5 million compared to $68.2 million last year. In the second quarter, the respective average yields on finance receivables were 17.6% and 17.5% in 2026 and 2025, while the average yields on contract receivables were 9% in 2026 and 9.1% in 2025. Total loan originations of $281 million in the second quarter represented a decrease of $12 million or 4.1% from 2025 levels. Originations of extended credit loans were $237.6 million in the period, reflecting a decrease of $5.9 million or 2.4% from last year. Moving to Slide 11. Our quarter end balance sheet includes approximately $2.5 billion of gross financing receivables, with $2.1 billion from our U.S. operation. For extended credit or finance receivables, the U.S. 60-day plus delinquency rate of 1.7% is down 10 basis points from the second quarter of 2025. Additionally, the rate is down 20 basis points from last quarter. Trailing 12-month net losses for the overall extended credit portfolio of $71.9 million represented 3.7% of outstandings at quarter end, down sequentially from 3.75% in the first quarter of this year. We believe that these portfolio performance metrics are encouraging considering the current environment. Now turning to Slide 12. Cash provided by operating activities of $271.5 million in the quarter compared to $237.2 million last year. Net cash used by investing activities of $195.1 million mostly reflected business acquisitions during the quarter of $154 million, net of cash acquired, consisting of $99.1 million for Diesel Laptops and $54.9 million for Hi-Force. Additionally, the company incurred $23.1 million in capital expenditures. Net cash used by financing activities of $185.8 million included cash dividends of $126.4 million and the repurchase of 241,000 shares of common stock for $91.4 million under our existing share repurchase programs. As of quarter end, we had remaining availability to repurchase up to an additional $485.5 million of common stock under existing authorizations. Turning to Slide 13. Trade and other accounts receivable of $942.2 million represented an increase of $60.8 million from 2025 year-end levels, mostly due to higher sales and $12.2 million from acquisitions. Days sales outstanding were 70 days at the end of the second quarter and 67 days at 2025 year-end. Inventories, including $17.6 million from acquisitions, increased by $20.1 million from 2025 year-end. On a trailing 12-month basis, inventory turns of 2.4 were the same in both periods. Our quarter end cash position of $1,644.7 million compared to $1,624.5 million at the end of 2025. That concludes my remarks on our second quarter performance. I'll now review a few outlook items for the remainder of 2026. With respect to corporate costs, we currently believe that expenses will approximate $28 million for each of the remaining two quarters of 2026. As a reminder, in the third quarter of 2025, our diluted earnings per share of $5.02 included a $0.31 nonrecurring one-time benefit from an RS&I Group legal settlement. We expect that capital expenditures for the year will be approximately $100 million, and we currently anticipate that our full year 2026 effective income tax rate will approximate 22%. I'll now turn the call back to Nick for his closing thoughts. Nick?

Thanks, Aldo. Well, that's the second quarter. Continuing momentum in the midst of extreme turbulence. To use an ancient reference, now suddenly contemporary, it feels like we're moving between the Scylla of international conflicts and the Charybdis of supply chain revisions. Although it's challenging, we are making headway. C&I is coming into its own: sales up organically 11%, gross margin 42.6% up 260 basis points, OI 16.8% — an all-time high. C&I is on a trend, demonstrating opportunities in rolling the Snap-on brand out of the garage are substantial. Tools Group sales up 3% organically and momentum continues. RS&I sales up 2.5% as reported, up 0.7% organically — robust with independents, impacted by the OEM doldrums. OI margins are 24%, down but still strong. All while managing the turbulence and funding increased investment. It all came together for the corporation: sales up 4.7% as reported, 3% organically; gross margins 51.4% and OI margin 21.8%, both robust. The results, individually and collectively, are marked by momentum, strength and continuing green shoots. It was an encouraging quarter and we believe it speaks volumes about the possibilities of our path. These are turbulent and interesting times, yet our markets remain quite resilient, both vehicle repair and critical industries, anchored in the essential nature of the tasks — activities that are needed come what may. The quarter showed we can participate fully in that resilience, wielding our decisive advantages in product, brand and people. Product: we make critical tasks easier, as echoed in the new offerings discussed. Brand: Snap-on defines the professional like no other brand. People: the Snap-on team is uniquely capable, deeply experienced and relentlessly committed to achieve. With the opportunities of our resilient markets and the power of our advantages, we are confident that we will extend our progress, maintain it even in turbulence and drive a positive trajectory through the year and beyond. Before I turn the call over to the operator, I'll speak directly to our franchisees and associates. You are those who really do make a difference. Snap-on's storied past, exciting present and promising future is rooted in your commitment. For the enthusiasm you bring to our enterprise every day, you have my admiration. For the success you've achieved this encouraging quarter, you have my congratulations. And for the unfailing dedication to our team and the firm conviction you have in our days and decades ahead for our enterprise, you have my thanks. Now I'll turn the call over to the operator.

And our first question today will come from David MacGregor with Longbow Research.

I want to start off by just asking about the gross profit upside in C&I, 220 basis points. How much of that do you think was mix driven versus maybe other factors?

Two sixty basis points, by the way. I might quibble a little bit. But yes, 260. Not so much mix. The highest profitability business, the industrial business, grew mid-single digits, so below the average. Then you had movements upward in a lot of those businesses because they brought out great new product, particularly power tools and torque. Torque's day has come, so they're making hay while the sun shines. You also had recovery in Asia Pacific and in our European operations where you got good absorption. I think those were the factors.

Okay. It seems like there was probably a pretty good pull-through to the Snap-on Tools segment on some of these bigger ticket items like diagnostics and maybe specialty torque, but the originations were down 4%. Do you think the franchisees are just restocking in these items, which would be a little surprising ahead of the SFC, but what's your perspective?

If you step back and look at what happened, there was pull-through. You have to parse between torque and diagnostics because torque isn't that big an origination product. So you have to diminish that in the mix. Diagnostics was up nicely, but tool storage was down, and tool storage is a bigger piece of the pie. So when it's down, there's more volume flowing through other products. Originations were down low single digits — a small change year-over-year. I don't think you can read too much into that in terms of stocking.

Okay. And then I think we've talked in the past about you increasing your in-sourcing since the whole tariff situation developed. Can you talk about the extent to which that may have helped you on the margin side this quarter?

I can't give direct numbers, but one example: our 14.4-volt ratchet line had been made in Kunshan and was impacted by tariffs. We brought that whole line back to the U.S. and started sourcing more volume in Murphy, which helped. We're doing similar things in torque. Diagnostics had already been bringing stuff home, so they avoided tariff entanglements. You saw good news in power tools and torque and the numbers show it — their profitability is up a considerable number of basis points.

Okay. Last question for me is just on gross margins in RS&I and in Snap-on Tools were down year-over-year, and I realize there's some mix discussion there as well. Aldo had characterized the gross margins as having benefit from RCI. I'm just wondering at what point you need to lean more aggressively into the market on pricing in order to protect these margins.

I don't want to lean aggressively into higher prices. The gross margin in Tools Group is down 30 basis points. The larger change in corporate gross margin included OE margin deterioration. Tools Group was down 120 basis points in the operating margin year-over-year. I prefer to address margin pressure with RCI and sourcing changes and by launching good new tools. In this quarter many of the big hits were made by other divisions and their margins were shared through the Tools Group, which made Tools Group margins appear thinner. That's really the cadence in the Tools Group; it isn't a large concern for us.

And our next question will come from Christopher Glynn with Oppenheimer.

Just want to use storage as a barometer for discussing the market for SOT. So storage had a really nice quarter last quarter, seemed to be some optimism would hold. But maybe the first quarter was just a little bit of isolated success that sort of defied the characterization of the market as fast payback. Do I have that right, would you say?

In the first quarter we launched a special semi-quincentennial tool storage set that gave some oomph to tool storage. We only made 1,776 of them; they were numbered and people scrambled to get them, which overcame normal reticence. This quarter the uncertainty is about the same. The geopolitical issues added reinforcement of uncertainty, but we didn't see a big change in our numbers. We chalk the first quarter's strength to a once-in-a-lifetime new product.

Got it. Great. On the C&I, APAC and Europe really pretty encouraging and the volume leverage notable. Anything interesting to say about market share in APAC and Europe?

We generally don't talk much about market share. However, the rebound in Europe for our hand tools business was large enough that you would suspect some share gains in normal times. Markets are up and down by region and quarter. We do feel we are getting more effective — our product lines are getting stronger and we are doing more direct customization in Europe and Asia. In Asia we're selling more premium Snap-on tools and some intelligent boxes, so that's working well.

Okay. What do you mean by more efficacious?

By more efficacious I mean our product lines are stronger and more tailored, and our local teams are doing better at customizing offerings to regional needs, which is improving outcomes in Asia and Europe.

And our next question will come from Scott Stember with ROTH.

Questions on some of the green shoots you talked about last quarter. It seems like there are higher-ticket new products doing well in tools, yet tool storage is still soft. Net-net, how much of the growth in tools is pivot-driven and how much is a potential thawing in demand for higher-ticket items outside of tool storage?

It's hard to say precisely, but products are helping the pivot: power tools and torque are clear pivot items and are contributing strongly. APOLLO diagnostics also had a very good launch. I'd estimate two-thirds or more of the growth was due to the pivot — power tools, torque and other quicker payback items.

Got it. And on C&I, there's been some commentary about opportunities within AI data center build-outs. Could you talk about that? Have you seen anything, and what green shoots do you see there?

We actually did have a good order serving some data centers that we expect to drive future business. Low-precision torque, which aligns with the Mountz product line we acquired, is selling to data centers in meaningful proportions. So that was part of the increase in C&I. Data center work is one area that appears to be heating up.

And you called out increased personnel expense across a couple segments. Is that driven by growing the business or anything else?

We're investing to grow the business. We added personnel in certain points of attack in the Tools Group and RS&I to try to break through constraints. That's why you see operating expenses up in those segments — higher personnel and support to expand the business.

And our next question will come from Gary Prestopino with Barrington Research.

Most have been answered. I wanted to ask about Diesel Laptops. Does this acquisition give you your first foray into the Class 8 truck business with a database like that?

It gives us a database in that area. We have positions in larger products via other vendors, but Diesel Laptops enhances our offerings in the heavy-duty space. Diesel Laptops has strong relationships with diesel customers and a database that provides the beginnings of replicating what we have for cars in trucks. We view it as an attractive opportunity to expand our presence and offerings in the heavy-duty market.

Okay. And it added about $4.7 million of sales this quarter, correct?

It's $4.7 million.

$4.7 million.

Gary, it's Aldo. Just remember, it was only a partial month. It was only in our results for a partial month in June.

That's what I was getting at, what kind of contribution it would make to the top line. And I would assume it's somewhat margin accretive.

It's EPS accretive, not necessarily margin accretive.

And our next question will come from Bret Jordan with Jefferies.

Nick, on your shop tours, you talked about the golden age of vehicle repair. Do you have any color as to contribution of car count versus price in the underlying industry growth? Are shop owners seeing more traffic or is it a lot of pricing benefit?

It's a windshield survey, but the technicians I talked to said they were slammed, so they acted busy. I'm not sure car count is the operative thing. Repairs per vehicle are getting more complicated. Pricing may be a factor, but complexity and time-per-repair are major drivers. For example, some brake systems require special tools; without them you must dismantle the brakes, adding a lot of time. Repairability is becoming an issue and that adds cost.

On the OEM side, since dealers were called out as weaker, is that driven by dealer sentiment or direction from OEMs? Is it OEM-driven softness or dealership rooftop-driven softness?

It's a combination. Automakers have slowed or reduced program launches, particularly around electrification and related investments, which affects our programs. Dealers are also somewhat uncertain about future model mixes and are holding back on capital until they take direction from OEMs. The OEMs' pause on programs plus dealer uncertainty has created a flat spot in sales.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Sara Verbsky for any closing remarks.

Thank you all for joining us today. A replay of this call will be available shortly on snapon.com. As always, we appreciate your interest in Snap-on. Have a good day. Goodbye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.